Well....clearly the street was priced for a favourable outcome and was short CDS. The Homer Simpson-esque 'D'OH!' was audible all over the street when Correa won.

From here? I am no expert on Ecuador by any stretch of the imagination, but my impression is that there is potentially more downside. Some Ecuador longs (literally, or via CDS deltas) are still trapped, and there remains ample scope for Correa to send spreads wider; for example, if he were to announce a re-structuring with a lower coupon and longer maturity profile, spreads could widen another few hundred beeps.

Of course, he may do nothing, and simply talk a dangerous game a la senor Chavez. At this point, though, it is probably a 50/50 proposition...in an asset with very low liquidity.

In doing a trade like this, you have to ask yourself what your advantage is. Sometimes, you know more than the market about the trade in question, and indeed Ecuador is a case where specialized knowledge will likely come in handy. However, if your advantage is simply that you've got bigger cojones than the next fellow, I'd suggest that the time to pull the trigger is when the odds are considerably greater than 50/50 in your favour.

Otherwise, you might a well just go to Vegas and put your money on red...and Vegas is almost certain to be more fun!

Well, given that we're now trading around the highs of the dayat 1.3180, it could well be a quation of minutes or hours, rather than days, before we trade 1.32.

Cable at 2.00 will take a bit longer. 2.00 has traditionally ben a fearsome technical resistance for sterling, so we could see some profit-taking ahead of the levelas we breach, say, 1.98 or 1.99.

However, you have to say that the force of momentum is for a weaker USD/Europe, and now even the dollar bloc (ex-Canada) is playing catch-up. So the underlying force of dollar weakness, combined with headline risk such as today's Scottish Power announcement, makes 'the deuce' in cable a reasonable bet before Christmas.